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Book Review: Blue Ocean Strategy


This classic by Chan Kim and Renee Mauborgne is one of the best business books of our time. The authors classify Corporate competition into two segments, Red Ocean where firms compete for market share and Blue Oceans where one firm grabs the helm and makes the rest of the completion irrelevant. 


The authors begin by using the  example of how Circ Du Soleil used the blue ocean strategy to create a niche for themselves, making traditional circuses like Barnum and Bailey obsolete.  What I liked about this book is that it is clear, concise and well written without excessive repetition. 

The authors also offer a clear framework for firms to create a blue ocean strategy.  This involves creation of a strategy canvas, a graph that identifies key factors of competition used by companies in the red ocean strategy. Rather than focus on the obvious factors like price and value firms must compete on 'Value Innovation', according to the authors.

After one creates the strategy canvas, the authors then demonstrate on a graph of four quadrants how firms can start to create a blue ocean strategy. In the first quadrant, they list all factors that a firm creating a blue ocean strategy out eliminate. In the second quadrant, they list all the factors that a firm could raise to add value. 

Then in the 3rd quadrant they list factors that blue ocean firm would seek to raise and finally in the forth quadrants all the new factors that must be created in the new product or service that the blue ocean firm would seek to create.

Some examples of blue ocean strategy include
  • the iTunes legal alternative for music downloads, eliminating the red ocean of music CDs
  • the Dyson alternative of bag less vacuum cleaners 
  • the [yellow tail] wine offering of wines which were sold as alternatives to beer and coolers eliminating red ocean competition from the wine industry.
  • do CoMo's offering of Internet services on cell phones in Japan.
  • the growth of Texas based Curves fitness centres, offering a easier alternative for staying fit to busy adults.
Creation of a Blue ocean strategy involves
  • Looking beyond your existing customers.
  • Looking for commonalities among your customer segments and for ways to serve all of them.
  • Looking for ways to promote one's offering with fewer barriers to adoption.
  • Trade offs between functional and emotional solutions for a customer.
  • Avoiding the red ocean trap of looking at number and focusing on the big picture.
  • The authors prescribe a sequence of actions to incorporate the strategy and insist that these steps are done in the correct sequence
  1. Look for buyer utility
  2. Look for price accessibility with customers
  3. Look to attaining your cost targets
  4. Seek to eliminate barriers to adoption
  5. Buyer utility is defined by six 'levers' or areas: Purchase, Delivery, Use, Supplements, Maintenance and Disposal. A blue ocean strategist would look into 
  • Eliminating blocks to customer productivity in these six areas
  • Creating simplicity, convenience fun and an image in the six areas
  • Seek to eliminate risk in these six areas
  • Eliminate blocks to environment friendliness in these areas.
To execute your strategy,
  • You must win over the naysayers in your organization particularly from the bottom
  • Allow the naysayers to 'experience' the pain from the current situation or solution
  • Meet the unhappy customers
  • Be transparent, fair and seek inclusion of all the stakeholders in the new processes of the blue ocean strategy

This is an excellent business book and almost offers a 'paint within the squares' approach, which many other books seem to forgo. This book is a must for any business book collection.

An interesting observation: Many reasons have been offered for New York City's sudden fall in crime by Guiliani, the authors of Freakonomics and Malcolm Gladwell. This book offers the Blue Ocean theory on this very subject. 
 

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